Correlation Between Bri Chem and Teck Resources

Can any of the company-specific risk be diversified away by investing in both Bri Chem and Teck Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bri Chem and Teck Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bri Chem Corp and Teck Resources Limited, you can compare the effects of market volatilities on Bri Chem and Teck Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bri Chem with a short position of Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and Teck Resources.

Diversification Opportunities for Bri Chem and Teck Resources

-0.25

Correlation Coefficient

Bri Chem  Teck Resources

Very good diversification

The 3 months correlation between Bri and Teck is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and Teck Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and Bri Chem is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bri Chem Corp are associated (or correlated) with Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Bri Chem i.e., Bri Chem and Teck Resources go up and down completely randomly.

Pair Corralation between Bri Chem and Teck Resources

Assuming the 90 days trading horizon Bri Chem Corp is expected to generate 3.29 times more return on investment than Teck Resources. However, Bri Chem is 3.29 times more volatile than Teck Resources Limited. It trades about 0.07 of its potential returns per unit of risk. Teck Resources Limited is currently generating about 0.03 per unit of risk. If you would invest  8.78  in Bri Chem Corp on September 19, 2024 and sell it today you would earn a total of  25.22  from holding Bri Chem Corp or generate 287.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Bri Chem Corp  vs.  Teck Resources Limited

Bri Chem Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bri Chem displayed solid returns over the last few months and may actually be approaching a breakup point.

Teck Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teck Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bri Chem and Teck Resources

The main advantage of trading using opposite Bri Chem and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bri Chem position performs unexpectedly, Teck Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Teck Resources will offset losses from the drop in Teck Resources' long position.

The idea behind Bri Chem Corp and Teck Resources Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.